S'pore home prices still falling

[TTTI]

Hi Big Toe,
Not sure if i posted it here.

One thing we have to take note is employment numbers. For a lot of people, because they have working income, they are able to sustain low rental yields while paying the loan. A private home is like their monthly investment plan. There are many especially the late 30s-50s age group who own private condos, rent out this condos, while they live in their first HDB flat.

So even if interest edge higher, I don't think prices will fall that much. ONLY when local employment rate falls, will we see a higher fall in housing prices.

I can't agree with this statement more.
Once unemployment rate goes up, we'll start seeing the prop prices come down faster than any gov cooling measures can cause.
Global interest rate can indirectly cause that.
As many other valuebuddies have contributed here, the SG economy is going downhill fast. 
I think many business owners will be able to see and feel that on a daily basis. The unemployment is still low currently, but my personal view is that as the interest rate goes up, more of the highly leveraged businesses, or uncompetitive businesses supported all these years by cheap liquidity, will have to change their operations drastically. Many will go belly up. 
That's when the unemployment rate goes up, and consequently, prop prices drop quickly.

Lively discussion, one of my fav threads here.

[Bibi]

U will see even more selling if gov were to cut 20% of all civil service pay.

[chew]

I think SG properties should be viewed like a blue-chip stock, maybe the bluest of blue. There'll always be demand at lower prices, and prices may not reach the rational low you compute.

[Triple70]

What an interesting claim! 

In my dictionary, the word "most" refers to >50% of a population. The last time I checked, monthly income ceiling for HDB BTO is $12,000. Therefore, your argument is that most (i.e. >50%) ppl have a combined income exceeding $12,000?

Singles do not qualify to buy flats at BTO prices.
The potential demand from this segment of the population have to be considered in the denominator.

[CityFarmer]

If memory serves me right, majority of US and Europe are on a freehold title, Japan and Korea had a significant degree of freehold as well but is now moving towards leasehold ppty.

East Asia Region -  Many cities adopt the leasehold system.

In terms of value, there is difference in value of leasehold vs freehold. At 99 years lease, the difference is about 4% in the Singapore Land Authority's (SLA) guide. When the lease has 50 years remaining, the difference between them and freehold is 25%. The value of the lease drastically reduces from 22 years remaning and below. When the lease has 22 years remaining, the difference between them and freehold is 50%.

Oh, I see. I don't know US and Europe property markets well, the same for Japan and Korea markets. 

IMO, the "house (home)" concept is pretty different between Asian, and American/European. Korea has very unique system, with my limited understanding. Japan is always an odd one among Asian countries. The comparison should be with similar major cities within the Asia region.

What do you think?

[Jacmar]

I think you guys are over simplifying the debate between leasehold and freehold properties. For example in Japan they have hefty inheritance tax. My Japan friend tells me that in 3 generations the property that you inherit will be gone to the govt. Does not matter whether it is freehold or leasehold.

[Jacmar]

Hi Big Toe,
Not sure if i posted it here.

One thing we have to take note is employment numbers. For a lot of people, because they have working income, they are able to sustain low rental yields while paying the loan. A private home is like their monthly investment plan. There are many especially the late 30s-50s age group who own private condos, rent out this condos, while they live in their first HDB flat.

So even if interest edge higher, I don't think prices will fall that much. ONLY when local employment rate falls, will we see a higher fall in housing prices.

I can't agree with this statement more.
Once unemployment rate goes up, we'll start seeing the prop prices come down faster than any gov cooling measures can cause.
Global interest rate can indirectly cause that.
As many other valuebuddies have contributed here, the SG economy is going downhill fast. 
I think many business owners will be able to see and feel that on a daily basis. The unemployment is still low currently, but my personal view is that as the interest rate goes up, more of the highly leveraged businesses, or uncompetitive businesses supported all these years by cheap liquidity, will have to change their operations drastically. Many will go belly up. 
That's when the unemployment rate goes up, and consequently, prop prices drop quickly.

Lively discussion, one of my fav threads here.

Agree that unemployment is key to property prices but i don't see it crashing. Softening yes due more to mismatch of demand vs supply. Sgp been a small economy has many levers to  pull before the economy is hit very hard. The govt can also tweak the cooling measures, foreign employees are hit hardest with retrenchment before it trickles down to local unemployment, govt can put in a lot more infrastructure projects etcetc. If you see past property price collapse it has always been from external shocks like GFC, AFC, SARS, dot-com etc etc.

Yes global economy is softening but don't see a major shock coming; not even the incoming interest rate increase which will be slow and mild in next few yrs. I think the only one to look out for is BREXIT if the Europeans are stupid enough to go on a feeding frenzy and shoot their own foot.

[CityFarmer]

Yes global economy is softening but don't see a major shock coming; not even the incoming interest rate increase which will be slow and mild in next few yrs. I think the only one to look out for is BREXIT if the Europeans are stupid enough to go on a feeding frenzy and shoot their own foot.

The obvious potential big external shocks are, IMO

- A hard Brexit opted in UK
- A "Trump" president in US
- A "hard-landing" in China

I agree, the US interest rate hike, will be slow and mild, hardly quality for a "shock".

What do you think? Anyone to add into the list?  

[Jacmar]

I just don't see a Trump presidency, not even close vote. As for China hard landing, i don't see it ripple through the world economy and cause a collapse except for those resource countries that rely on China. Look at Japan. They have so many lost decades already and still economy has not collapse.Why? The key is if you don't have to borrow from outsiders and they can pull the rug from under you. China has deep pockets just like Japan has borrowed money from their citizens. In the meantime China is turning to domestic sectors to prop up the economy. Look at how may billions is Wanda group investing in local theme parks.

[corydorus]

The last China stock crash hits STI quite badly last year. Imagine a real china bubble crash. It can be very damaging considering we have many local listed companies vested there. Chain events from commodities countries will affect us too. So impact by China cannot be underestimated even with soft landing.

Trump Presidency can be a Black Swan event.

I see much lesser impact by BreExit.